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FOR RELEASE: 9:00 P.M. ET, THURSDAY, AUGUST 30, 2001

JAPAN COMPOSITE INDEXES FOR JUNE 2001

The Press Release in a PDF file
English Version     Japanese Version

The leading index for Japan decreased 0.6 percent in June, and the coincident index remained unchanged. Taken together, the two composite indexes show no sign of recovery in Japan's weakened economy.

  • The rapid decline in the leading index that began in August 2000 continues, and the index is now 5.4 percent below its most recent peak.
  • The coincident index, a barometer of the current economy, stalled again in June, following the decline from its most recent high reached in January 2001.
  • Weakness in the leading index is also widely distributed among its components as indicated by the low diffusion index which measures the proportion of components rising over the six-month span. These point to the depth and breadth of weakness in the Japanese economy, which is most likely to continue in coming months.

LEADING INDICATORS. Eight of the twelve components that make up the leading index decreased in June. The negative contributors to the index - ranked in order from the largest negative contributor to the smallest - are the six month growth rate of labor productivity per man-hour in manufacturing, stock prices, dwelling units started, the price to unit labor cost ratio in manufacturing, the index of overtime worked for manufacturing, real operating profits*, new orders for machinery and construction, and yield spread. The positive contributors to the index - ranked in order from the largest positive contributor to the smallest - are hours worked in all industries, change in consumer credit outstanding*, inverted business failures, and real money supply.

With the decrease of 0.6 percent, the leading index now stands at 88.4 (1990=100). This index increased 0.1 percent in May and decreased 0.1 percent in April. During the six-month span through June, the index decreased 4.4 percent, and only two of the twelve components advanced (diffusion index, six-month span equals 16.7 percent).

* See Notes under Data Availability.

The next release is scheduled for September 30, 2001 at 9:00 P.M. ET
In Japan - October 1, 2001 at 10:00 A.M. (JST)

COINCIDENT INDICATORS. Three of the six components that make up the coincident index increased in June. The positive contributors - in order from the largest positive contributor to the smallest - are real wholesale sales, real manufacturing sales*, and wage and salary income. The two negative contributors - from larger contributor to smaller - are industrial production and number of employed persons. And real retail sales remained the same in June.

The coincident index now stands at 103.0 (1990=100), with no change in June. This index remained unchanged in May, and decreased 0.5 percent in April. During the six-month span through June, the index decreased 1.7 percent, and only one of the six components advanced (diffusion index, six-month span equals 16.7 percent).

FOR TABLES AND CHARTS, SEE BELOW

DATA AVAILABILITY. The data series used to compute the two composite indexes reported in this release are those available "as of" 10:00 A.M. ET August 27, 2001. Some series are estimated as noted below.

Notes: The series in the leading index that are based on The Conference Board estimates are change in consumer credit outstanding and real operating profits. The series in the coincident index that is based on The Conference Board estimate is real manufacturing sales.

# # #

Professional Contacts at The Conference Board:
Ataman Ozyildirim: 1-212-339-0399
Michael Fort: 1-212-339-0402

Media Contacts:
Randy Poe: 1-212-339-0234
Frank Tortorici: 1-212-339-0231

Website: http://www.globalindicators.org
E-mail: indicators@conference-board.org


THE CYCLICAL INDICATOR APPROACH. The composite indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The leading and coincident indexes are essentially composite averages of between five and twelve individual leading or coincident indicators. (See page 3 for details.) They are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component-primarily because they smooth out some of the volatility of individual components.

Historically, the cyclical turning points in the leading index have occurred before those in aggregate economic activity, while the cyclical turning points in the coincident index have occurred at about the same time as those in aggregate economic activity.

A change in direction in a composite index does not signal a cyclical turning point unless the movement is of significant size, duration, and scope. Historical analysis with U.S. data shows recession warnings are best determined by looking for negative growth of at least 1 percent, coupled with declines in at least half of the components over a six-month span. Further explanations of the cyclical indicator approach and the composite index methodology appear in The Conference Board's Business Cycle Indicators report and Web site:www.globalindicators.org.

* See Notes under Data Availability.

Japan Composite Indexes: Components and Standardization Factors
 Leading IndexFactor
1.Yield Spread.2310
2.Six Month Growth Rate of Labor Productivity.0859
3.Change in Consumer Credit Outstanding.0001
4.Index of Overtime Worked.0546
5.New Orders for Machinery and Construction.0266
6.Stock Prices.0252
7.Operating Profits.0410
8.Price to Unit Labor Cost.0608
9.Money Supply.1504
10.Dwelling Units Started.0153
11.Business Failures.0144
12.Hours Worked.2947

Coincident Index
1.Wage and Salary Income.1660
2.Real Wholesale Sales.0810
3.Real Retail sales.0890
4.Real Manufacturing Sales.1730
5.Industrial Production.1050
6.Number of Employed Persons.3860

Notes:
The component factors are inversely related to the standard deviation of the month-to-month changes in each component. They are used to equalize the volatility of the contribution from each component and are "normalized" to sum to 1. These factors were last revised effective with the October 4, 2000 release, and all historical values for the two composite indexes were revised at that time to reflect the changes. (Under normal circumstances, updates to the leading and coincident indexes only incorporate revisions to data over the past six months.)

The factors above for the leading index were calculated using 1977-1998 as the sample period for measuring volatility. A separate set of factors for the 1974-1977 period, 1970-1974 period, 1966-1970 and also 1965-1966, is available upon request. The factors above for the coincident index were calculated using 1970-1998 as the sample period; a separate set of factors for the 1965-1970 period is available upon request. These multiple sample periods are the result of different starting dates for the component data. When one or more components is missing, the other factors are adjusted proportionately to ensure that the total continues to sum to 1. For additional information on the standardization factors and the index methodology visit our Web site: www.globalindicators.org.

To address the problem of lags in available data, those leading and coincident indicators that are not available at the time of publication are estimated using statistical imputation. An autoregressive model is used to estimate each component. The resulting indexes are constructed using real and estimated data, and will be revised as the data unavailable at the time of publication become available. Such revisions are part of the monthly data revisions, now a regular part of the U.S. Business Cycle Indicators program. The main advantage of this procedure is to utilize in the leading index the data such as bond yields and stock prices that are available sooner than other data on real aspects of the economy such as sales and operating profits. Empirical research by The Conference Board suggests there are real gains in adopting this procedure to make all the indicator series as up-to-date as possible.


NOTICES

The 2001 schedule for "Leading Economic Indicators" news releases is:
July 2001 data …Sunday, September 30, 2001
August 2001 data... Wednesday, October 31, 2001
September 2001 Data ... Monday, December 3, 2001

All releases are at 9:00 P.M. ET and 10:00 A.M. JST (following day)

ABOUT THE CONFERENCE BOARD. Founded in 1916, The Conference Board is the premier business membership and research network. The Conference Board has become a global leader in helping executives build strong professional relationships, expand their business knowledge and find solutions to a wide range of business challenges. The Board's Economics Program, under the direction of Chief Economist Gail Fosler, is a recognized source of forecasts, economic analysis and objective indicators such as the Leading Economic Indicators and the Consumer Confidence Index.

This role is part of a long tradition of research and education that stretches back to the compilation of the first continuous measure of the cost of living in the United States in 1919. In 1995, The Conference Board assumed responsibility for computing the composite indexes from the U.S. Department of Commerce. The Conference Board now produces business cycle indexes for the U.S., Australia, France, Germany, Korea, Japan, Mexico and the U.K. To subscribe to any of these indexes, please visit www.globalindicators.org, contact the Global Indicators Research Institute at 212-339-0330, or email indicators@conference-board.org.

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(Includes monthly release, data, charts and commentary)
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Business Cycle Indicators for France, Germany, Japan, Korea, Mexico and the U.K. are available at $500 per country per year (1 user). Discounts are available to Associates of The Conference Board and accredited academic institutions.